USD/CAD posted a slight decline in Asian session trading on Wednesday (30/November). The cause was the improved market sentiment, but was still restrained in the resistance area formed following a rapid rally over the previous three days.
The publication of Canadian economic growth data last night also failed to be a significant catalyst for the Canadian dollar rate. Analysts assess the outlook for the CAD against various other currencies remains weak in the medium term.
The Statistics Agency of Canada reported that GDP growth in the third quarter of this year reached 0.7 percent. That was for Quarter-over-Quarter period.
That performance was weaker than the 0.8% growth in the previous report. However, that number was higher than the consensus estimate of just 0.4%.
The GDP was Corrected from 3.2% to 2.9%
The Canada's annualized GDP only corrected from 3.2% to 2.9%, instead of retreating to 1.5% as previously predicted. Unfortunately, none of this likely influenced the central bank's decision to slow the pace of rate hikes.
Data released a month ago signals quarterly growth of 1.6 percent. What came out was a surprise 2.9%, well above consensus expectations and the central bank's forecast of 1.5%.
It was said by Matthieu Arseneau, a chief deputy economist at National Bank Financial Markets. Does this mean the central bank needs to respond more aggressively than people previously thought?
Although the key GDP figures exceeded consensus expectations thanks to a large contribution from (sector) trade, the details of the report were not very encouraging.
USD/CAD may be Affected by Powell’s Speech Later
Despite the overnight USD weakness against most currencies, the CAD lags behind its peers and remains weaker at the start of the session. That was said by Bipan Rai of CIBC Capital Markets.
People are now trading USD/CAD in the range of 1.30-1.35 over the coming period. Besides that, they also choose to play there for now.
The next USD/CAD could be affected positively as well as negatively by Fed Chairman Jerome Powell's speech later in the evening. The development of world oil prices can be affecting too.
The handling of the pandemic in China could also have an impact on Loonie's movements. That is why; many market participants decided to wait for that important speech.
China’s PMI manufacturer is Contracted
China's manufacturing PMI data published by the National Bureau of Statistics on Wednesday (30/November) showed that the industrial sector contracted again in November.
That is characterized by a decrease in the index from 49.2 to 48.0. It was lower than the market's expectation for a decline to 49.0 alone.
The slump was largely triggered by the government's re-implemented COVID restriction measures. The reason is, several regions in China have become the epicenter of the spread of that virus in recent times.
The number of daily cases has even reached 40,000. That is why; the Chinese government has been forced to re-impose restrictions on public activities and business activities.
Some Manufacturing Sub-Indices Slumped Significantly
Sharp declines also occurred in several manufacturing sub-indices. The Output component fell from 49.6 to 47.8, New Orders weakened from 48.1 to 46.4.
Meanwhile, the Export Orders shrank from 47.6 to 46.7. China's non-manufacturing PMI data has also regressed over the past two months. Observed, the services sector fell from 48.7 to 46.7 in November.
Based on the NBS senior statistician Zhao Qinghe, there are currently 15 of the 21 service categories that are still slumping (contracting). He also acknowledged that several categories of service sectors are still expanding.
Those are like the pharmaceuticals, food processing, IT, electricity, and construction sector. The economy there in general has been facing major headwinds since the beginning of 2022.
The Zero COVID policy has forced Beijing to impose strict restrictions in April and May that adversely affected the economy. That's why the restrictions that were re-imposed recently were protested by the public.